(a) Calculation of external cost per unit.

Question

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Answer 1

Question

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

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Students have asked these similar questions

Problem 1: Externality The weekly supply and demand for packs of cigarettes in the United States is given in the figure below. Suppose cigarette smoking causes an external cost on nonsmokers, as shown by the social benefit curve on the graph. Price ($) 36 34 32 30 - 28 26 - 24 22 - EMC S SEMC pvt 20 - 18- 16 - 14 - 12 - 10- 8 MB pvt social 2 MB 10 12 14 16 18 20 22 24 26 28 30 32 Pack of cigarettes (millions) a. This is a [ Select ] [ Select ] externality.

Explain the two main causes of market failure (externality and market power) and give an example of each.

Explain in detail. How externality can lead to a market failure?

Answer 2

Question

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

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Answer 3

Question

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

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Answer 4

Question

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 6

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 7

Chapter 13, Problem 3E

To determine

(a)

Calculation of external cost per unit.

Answer 8

Expert Solution

Answer to Problem 3E

The external cost per unit of output is $2.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

Note- External cost = Social Cost − private cost.

Answer 13

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 14

To determine

(b)

The level of output to produce.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 15

To determine

(b)

The level of output to produce.

Answer 16

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to produce is determined where its PMC = MB. So, at 3.5 unit the PMC is 7 (producing of extra unit the PMC is $2. So, PMC for producing 0.5 unit is $1.)which equal to the marginal benefit of $7 (the value between 8 and 6 in MB column).

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Expert Solution

Answer 20

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 21

To determine

(c)

The level of output at which economic efficiency is to achieved.

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 22

To determine

(c)

The level of output at which economic efficiency is to achieved.

Answer 23

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

The level of output to achieve economic efficiency exists at a point where its social marginal cost is equal to its marginal benefits (SMC = MB). So, the output level for economic efficiency is 3.

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Expert Solution

Answer 27

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impact other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 28

To determine

(d)

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).

Answer 29

To determine

(d)

Answer 30

Expert Solution

Explanation of Solution

Quantity	Private Cost	Private Marginal Cost (PMC)	Social Cost	Social Marginal cost (SMC)	Benefit	Marginal Benefits (MB)	External Cost
1	2	0	4	0	12	12	2
2	6	4	10	6	22	10	4
3	12	6	18	8	30	8	6
4	20	8	28	10	36	6	8
5	30	10	40	12	40	4	10

At point 3.5; the difference between successive external cost is $1 (by interpolating $7-$6) per 0.5 unit or the value they are willing to give up is $6 for manufacturing only 3 units instead of 3.5 units.

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Expert Solution

Answer 34

Economics Concept Introduction

Externalities: The externalities arise when the consumption of goods and services impacts other people directly or indirectly. However, the nature of impact determines the type of externalities (positive externality or negative externality).